Apple’s ‘Innovative’ Australian Patent Strategy
|Written by Mark Summerfield
Senior Associate, Patent and Trade Marks Attorney
Watermark - Intellectual Asset Management
Author/Editor of Patentology Blog --- Google+
Australia has two different types of utility patent. A ‘standard patent’ is the traditional type, in which all valid claims must meet the well-established requirements of novelty and inventive step (i.e. nonobviousness), and which has a maximum term of 20 years from filing if all annual maintenance fees are paid. Extensions of this term by up to five years are available for certain pharmaceutical patents, as compensation for time effectively lost while obtaining regulatory approvals.
The second type of patent, called an ‘innovation patent’, is in many respects unique to Australia. An innovation patent provides a ‘second tier’ right, with a lower barrier to validity than the conventional inventive step test, and a shorter maximum term of protection of just eight years. An innovation patent also differs from a standard patent in that a maximum of only five claims is permitted, although there are no additional restrictions on the form of these claims. For example, any number of them may be independent claims.
Second tier invention rights, more typically known as ‘utility models’ or ‘short term patents’ and having terms of between 6 and 15 years, are not particularly unusual. Such rights are available, on one form or other in over 70 countries around the world. In China, utility model patents are obtained about as often by domestic applicants as are standard patents, although the second tier system is barely used by foreign applicants.
The Australian innovation patent system differs from most other second tier rights in three important respects.
First, unlike most utility model rights, there are virtually no restrictions on the subject matter of an innovation patent. Other than claims directed to plants and animals, anything that would validly be the subject of a standard patent can also be protected by an innovation patent. Most utility models in other countries are limited to articles of manufacture, i.e. physical apparatus. Processes are typically not protectable, which severely restricts the use of utility model rights for such things as computer implemented inventions.
Second, there is a well-defined innovation threshold test set out in the Australian Patents Act 1990 for assessing the validity of claims in an innovation patent. The requirement that a claimed invention involve an ‘innovative step’ involves comparing a claim against each single item of prior art (combining of disclosures, as in an obviousness analysis, is not permitted) and assessing whether or not any feature or limitation of the claim which is not disclosed in the prior art makes ‘a substantial contribution to the working’ of the innovation. This is a form of modified novelty test which requires assessing only whether a novel limitation corresponds with some meaningful functional difference, as opposed to being an immaterial variation.
While many other second tier protection systems set a lower threshold for validity than is required of a standard patent, few codify the test to the extent of the Australian law. Furthermore, the Australian standard is very low. The interpretation of the innovative step test has been considered a number of times by the courts – including on appeal – and it is very clear that an innovative step can be present even if the claimed innovation is plainly obvious in view of the totality of the prior art.
Finally, it is a common feature of second tier rights that no substantive examination is performed before issuing the right, and in many countries the proprietor is entitled to seek enforcement without taking any further steps. The validity of many utility models, for example, is never tested until it is challenged in a court, often only in response to an infringement action. The Australian system, however, requires that an innovation patent be examined by the Patent Office, and certified as valid, before it can be enforced. Otherwise, substantive examination is entirely optional, although the process is relatively speedy, typically taking only 2-8 months to complete. Certification of an innovation patent is therefore a strong indication that the patentee considers that the patent may be required for use in an infringement action. Only about 20% of all currently live innovation patents have been certified at any time since filing.
Divisional Innovation Patents
An innovation patent application may be divided from a pending standard patent application. Notably, Australian divisional applications can be used in the same way as US continuations – a divisional application may include any claims that are adequately supported by the disclosure in the original filing.
It is therefore possible to divide an innovation patent from a standard application, and request examination, in order rapidly to obtain a robust enforceable right. As an added benefit, unlike a standard patent, an innovation patent is not subject to any pre-certification opposition proceedings. The original application may remain pending, or under examination, for many subsequent months or years.
Since there is a prohibition under the Australian law on ‘double patenting’ (i.e. obtaining two patents with claims of the same scope), grant of a standard patent may be ‘blocked’ until the innovation patent either expires, or is expressly surrendered by the patentee. However, once the innovation patent is no longer in force, a corresponding standard patent may be issued for the remainder of its normal 20 year term.
This strategic use of divisional innovation patents has become reasonably common. Indeed, in most of the litigation involving innovation patents which has occurred to date, the asserted patents have been divisionals of pending standard patent applications.
Australia in Apple’s Sights
As readers will no doubt be aware, Australia is one of the jurisdictions in which Apple is currently pursuing litigation against its Android-based smartphone and tablet competitors. The claims and counter-claims by Apple and Samsung are the subject of a trial in the Australian Federal Court in Sydney which has now been extended into the first months of 2013. According to reports, as many as 22 Apple patents have been asserted against Samsung, although it is as yet unclear how many of these will actually be pressed at trial. A number of the asserted patents are innovation patents.
The chart below shows the number of Australian patents issued to Apple each year since 2002. The numbers are broken down to show the total number of standard patents granted, the total number of innovation patents granted (bearing in mind that an innovation patent generally issues within a few weeks of filing, but is not enforceable until certified), and the number of these innovation patents which have since been certified. The figures for 2012 are year-to-date (up to the end of July), and it is therefore to be expected that these numbers will increase by the end of the year. In particular, while only two of the seven innovation patents granted so far this year have been certified, four others are already under examination and are therefore likely to be certified in the coming months.
A number of things are notable about Apple’s Australian patent strategy.
- The chart shows patents issued each year. Of course, the corresponding applications were filed somewhat earlier (typically by at least three to four years), suggesting a deliberate increase in Australian patent filings by Apple starting around 2006-2007, i.e. just prior to the launch of the original iPhone.
- Apple has had almost all of its innovation patents certified (75 so far, out of 85 in total, with four still under examination). This compares with around a 20% certification rate across all innovation patents filed. Apple’s 75 certified innovation patents represent over 1 in 20 of all certified innovation patents currently in-force! Apple is now the single largest user of the innovation patent system.
- A majority of the innovation patents obtained by Apple are divisionals of pending standard patent applications, implying an intentional strategy of building up a portfolio of robust and rapidly-enforceable rights in the short term, with a view to longer-term protection of inventions where warranted.
- A conservative estimate of the total costs incurred by Apple in relation to the standard patents, and certified innovation patents, issued in Australia since the beginning of 2007 would be around $1 million. In top of this, it has a further 222 standard patent applications pending, which will more than double its total expenditure if all ultimately proceed to grant.
These figures must be viewed in the context of an Australian market for Apple’s products which is no more than around 7.25% of that in the US (based purely on total population). The total cost of Apple’s current Australian litigation against Samsung is difficult to estimate but, as the largest patent case ever run in this country, costs well into the tens of millions of dollars would not be unlikely.
The overall picture is one of a deliberate Australian patent acquisition and enforcement strategy which has been in-place since at least the launch of the original iPhone. The almost inescapable conclusion is that Apple saw Australia as a key jurisdiction in which to litigate, should this become necessary, and planned for this eventuality for more than four years prior to actually filing suit against Samsung in the Australian Federal court at the end of July 2011.
While the costs of patenting and litigation in Australia are lower than in the US – perhaps by a factor of two or three – the relative size of the market nonetheless means that if Apple were to assess the value of patent acquisition and enforcement in Australia purely in terms of protecting a local market, it would reach the conclusion that the effective return on investment is still around four or five times better in the US.
However, Apple is pursuing a global enforcement program, and in this context its actions in Australia take on greater strategic importance. It has already struck one blow against Samsung, by initially winning a preliminary injunction preventing the launch of the Galaxy Tab 10.1 tablet in August 2011. And while this decision of a single judge of the Federal Court was subsequently overturned on appeal, it nonetheless resulted in Samsung effectively missing the main annual shopping period, with the first products finally arriving on the Australian market less than two weeks before Christmas.
In terms of validity, Apple’s innovation patents will be virtually unassailable, due to the low ‘innovative step’ threshold, while the tests for infringement, and the remedies available, are exactly the same as for standard patents.
Clearly there will be no truce between Apple and Samsung which applies solely to the Australian market. Both are global companies, with intellectual property rights across all major jurisdictions, and any settlement ultimately reached will need to be agreed on a global basis. Australia is just one limb of Apple’s overall strategy, but one which it has clearly determined can be used to apply additional pressure to its rivals.
In the meantime, thanks to Apple, this is a rare instance in which the eyes of the world are on the Australian courts and, it seems, will continue to be so into 2013 and perhaps beyond.
About the Author
Mark Summerfield is a registered Australian Patent Attorney, working in the profession since 2002. He is also registered as a Trade Marks Attorney in Australia, and is a Patent and Trade Mark Attorney in New Zealand as well. He holds a Bachelors degree in Electrical Engineering from Melbourne University and a Ph.D. in the area of optical fibre communications systems, also from Melbourne University. He is also the editor and primary author of the Patentology Blog. He is also reachable via Google+.